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January 24th, 2019 at 12:30 pm

Retailers rethink physical stores as click-and-collect catches on

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Buy online, pick-up in store is often heralded as the future of retail: Customers shopping on their own terms, as efficiently as possible. But it might end up being a bigger lift than expected for retail stores.

Large retailers like Target, Walmart, Kroger and Home Depot are using store pickup to cut delivery costs, encourage customer interaction with associates, and drive in-store sales growth. It’s a strategy that seems to be working: according to an International Council of Shopping Centers 2018 holiday season survey, 86 percent of U.S. shoppers purchased something new while picking up e-commerce orders in stores. Target saw a 5.7 percent holiday sales bump for November and December, in part due to store pickup. And three out of every four digital Target orders are fulfilled by a store, evidence of the central place stores can play in an e-commerce supply chain.

“We consider our stores our single biggest competitive advantage; they function as service hubs, fulfillment hubs, and they’re incredible showrooms for inspiration,” said Target CEO Brian Cornell at the National Retail Federation’s Big Show this week.

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Using stores to fulfill online orders lets retailers add supply chain muscle to their e-commerce businesses. But it does come with risks. As demand grows for in-store pickup, in-store fulfillment could put pressure on traditional store operations. It also opens up questions of whether retail spaces designed for browsing can double effectively as e-commerce pickup and packing centers.

“No one believes a store will be as efficient as a warehouse, and the question is how good can they make it to narrow the gap between a store and a distribution center,” said Nomura retail analyst Simeon Siegel.

Retailers say they’re planning for future demands by reconfiguring stores and adding employees.

“We have dedicated team members that pick and pack orders,” said a Target spokesperson, in an email. “We will continue to plan our staffing to meet the expected demand to ensure a consistent experience.”

A spokesperson for Home Depot said the company is preparing for increased demand for online orders by reconfiguring store layouts in checkout areas to reduce congestion; adding online pickup lockers and flexible checkout areas that can be converted to either staffed or self-checkout areas; and revamping the backend software to handle customer orders to ensure they’re processed as quickly as possible. Meanwhile, The Container Store said it has no plans to turn stores into fulfillment centers; it said it can efficiently process orders with in-store stock or ship items from distribution centers if necessary to meet “click and collect” demands.

It’s also a solution better suited for big-box retail: Smaller retailers may feel more squeezed by a rush of click and collect orders, said Jeffrey Neville, retail analyst at BRP Consulting.

“There’s definitely a possibility for glut, especially for some smaller, boutique brands,” he said. “A big pile of packages waiting to be picked up can really clutter things up, especially if the store is going for a more minimalist aesthetic.”

The future of click and collect may be more about rethinking the end-to-end transaction process to better predict customer behavior and store traffic, said Cort Jacoby, a partner at A.T. Kearney’s consumer and retail practice.

“Right now, there’s more of a celebration of being able to execute on ‘buy online, pick up in store,’” he said, “But in the future there may be more anticipation and other things like building a subscription base — you can’t go into it without reconfiguring it and rethinking it.”

Via Digiday

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